The tradeoff between centralized and decentralized health services: Evidence from rural areas in Mexico

This study investigates the effectiveness of centralized and decentralized health care providers in rural Mexico. It compares provider performance since both centralized and decentralized providers co-exist in rural areas of the country. The data are drawn from the 2003 household survey of Oportunidades, a comprehensive study of rural families from seven states in Mexico. The analyses compare out-of-pocket health care expenditures and utilization of preventive care among rural households with access to either centralized or decentralized health care providers. This study benefits from differences in timing of health care decentralization and from a quasi-random distribution of providers. Results show that overall centralized providers perform better. Households served by this organization report less regressive out-of-pocket health care expenditures (32% lower), and observe higher utilization of preventive services (3.6% more). Decentralized providers that were devolved to state governments in the early 1980s observe a slightly better performance than providers that were decentralized in the mid-1990s. These findings are robust to decentralization timing, heterogeneity in per capita government health expenditures, state and health infrastructure effects, and other confounders.